Oct. 11 (Bloomberg) -- Venezuela’s Hugo Chavez named a new
vice president yesterday, putting his longtime foreign minister,
Nicolas Maduro, in line to succeed him as the socialist leader
begins another six-year term while battling cancer.

Maduro, a former bus driver with close ties to Cuba, will
replace outgoing Vice President Elias Jaua, Chavez said at an
event in Caracas declaring him the winner in Oct. 7 presidential
elections.

Maduro’s appointment so soon after the vote is a sign that
Chavez may be grooming him as a successor, seeing him as “safe
bet” who can keep together a coalition of military and civilian
supporters, said Gregory Weeks, a professor in Latin American
politics at the University of North Carolina in Charlotte.

“Chavez doesn’t want confusion about what direction the
revolution might take after he’s gone,” said Weeks, who has
followed Venezuelan politics for years and frequently writes
about the country on his blog.

In the wake of Chavez’s 11 percentage point victory over
opponent Henrique Capriles Radonski, investors are following
closely the president’s health and his choosing of a potential
heir. While Chavez said in June that he was completely recovered
after three surgeries for an undisclosed type of cancer, he
limited his public appearances during the recent campaign,
leading Barclays Plc and Goldman Sachs & Co. to speculate that
his health may not hold up for another six years.

Bonds Rebound

Venezuela’s bonds have rebounded after posting initial
post-election losses. JPMorgan Chase & Co. yesterday raised its
recommendation on Venezuelan debt to overweight due to Chavez’s
more conciliatory tone in the wake of his victory, the lack of
social unrest and opposition candidate Capriles’ strengthened
leadership role.

The yield on Venezuela’s bonds due in 2027 fell 23 basis
points, or 0.23 percentage point, to 10.83 percent, at 9:52 a.m.
today in Caracas, according to data compiled by Bloomberg. The
bond’s price rose 1.54 cents on the dollar to 88.44 cents.

“The market is interpreting this as moving closer to
regime change while the risk environment today is positive
worldwide,” Boris Segura, a Latin America strategist at Nomura
Securities International Inc., said in a phone interview.

Chavez frequently shuffles his cabinet to surround himself
with loyalists, having gone through seven vice presidents since
taking office in 1999.

Long Serving

Maduro, 49, is one of his longest-serving aides, having
been the president of the National Assembly before becoming
Venezuela’s top diplomat in 2006. Earlier this year Chavez asked
Maduro to resign in order to run for the governorship of
Carabobo state, though in August he changed his mind and said he
was staying in his post defending Chavez’s anti-American
alliance with countries including Iran, Cuba and Nicaragua.

Maduro replaces Vice President Elias Jaua, who previously
announced he was stepping down to run in December for governor
of Miranda. He’ll face off against Capriles, who said yesterday
that he is seeking to regain the job he held before running for
the presidency.

Under Venezuelan law, if Chavez is too ill to serve during
the first four years of his term, the vice president assumes the
presidency for 30 days while elections are held. If he can’t
serve the final two years, the vice president can finish out the
term.

Constitutional Change?

The large margin of victory may encourage Chavez to try and
amend the constitution to allow a successor to serve a full term
should he be compelled to step down, said Michael Shifter,
president of the Washington-based Inter-American Dialogue.

“This has been the Chavez formula, changing the rules of
the game but doing so through the institutional framework which
he controls,” Shifter said by telephone from Washington. “He
knows better than anybody that if something were to happen to
him within four years and then there were new elections, the
opposition would probably win. That would be the end of his
revolution, and obviously he wants to prevent that.”

While Chavez was evidently limited by his health during the
election campaign, Segura cautioned from interpreting Maduro’s
appointment as a sign of imminent change since his prognosis has
been treated as a state secret.

“This is more of a medium term development,’ he said. “Is
this going to happen in the next six months? Not really.”